The vehicle industry is undergoing a tectonic shift. Traditional automotive manufacturers are being forced to think more like transport service providers. Major car manufacturers have created mobility service offerings and made significant investments in ridesharing platforms.
Smart components which monitor, report and control car operations are on the rise. Ubiquitous connectivity, the miniaturization of components and the exponential rise of computing power are driving the development of the Internet of Things (IoT). By 2020, one in five vehicles in operation - roughly 250 million cars - will have some form of wireless network connection.
Consumer expectations around mobility are higher than ever before, driven by rapid technology development in the consumer electronics market. The autonomous, electrified car as part of an on-demand fleet is the customer's new ideal. Companies like Tesla, Alphabet’s Waymo, and Uber are regarded as pioneers in this field.
For decades, the automotive industry has been a complex manufacturing and dealership system. Now, it is becoming a system of transport networks, enabling ubiquitous mobility.
Today’s players must change drastically
Manufacturers are inexperienced in both software technologies and how to adopt platform models. They are also contending with evolving regulatory frameworks.
A recent study by Xapix and Harvard Business School researchers highlights the following challenges:
- Consumer demand is growing for digital experiences and connectivity inside cars
- Vehicle manufacturers have limited digital capabilities
- Faster design cycles are needed, with better capacity for upgrades
- New data streams from in-vehicle digital capabilities are not being optimally used
Manufacturers are concerned about losing their tight control over their brand, their ownership of data and their consumer's experience. Additionally, incentives to join data-driven partnerships are often misaligned or unclear. This grinds innovation to a halt. While data is seen as the new oil, the means to pump it at scale are missing.
How digital mobility businesses can come to life
Vehicle ownership is shifting toward short-term focused ownership models, based on trips or segments. Commercial fleets of autonomous cars will give the individual customer the power to decide what type of vehicle, amenities, and service they need depending on the context of their trip. The service offering will be fluid, reflecting a wealth of partnerships that fleet operators have built to improve their offering.
There are four key areas for stakeholders to focus on:
Streamlined monetization of data. Each partnership is currently negotiating its own deal, with very limited standardization.
Automated curation of data. Developing the ability to evaluate programmatically and approve each partner, for instance through recognized identification streams for partners. Partnering will scale from the tens to hundreds of thousands.
Privacy & regulation. Extended opt-out/opt-in capabilities for private or commercial vehicle owners, based on product or geographical region.
Reduced cost of partners by providing transparency and uniformity, both in terms of standards and also commonly accepted platforms such as operating systems.
The technology behind new business opportunities
Application Programming Interfaces (APIs) and blockchain are technological means to reduce transaction costs further, to make complexity manageable, and to make risk and opportunities calculable. They enable large-scale distribution of data and traceability around ownership. Gaining regulatory clarity will drive confidence in the system and help attract investment.
From a technology and business model perspective, partnering technologies are the bridge between the current reality of mobility systems, and future ambitions. Mediation layers are evolving to process and share data at scale (e.g. through APIs). They will expand into additional functionalities around data distribution and securitization (such as blockchain), moving from bespoke agreements and case-by-case partnerships to standardized agreements.
The 5 groups that make up the new set of automotive players
In this new economy, emerging platform layers suggest a future-proof network of transport systems. The neural network of this system will encompass traditional vehicle manufacturers and their suppliers, as well as thousands of cities and municipalities, insurance companies, home entertainment, food and beverage service providers, and many other adjacent verticals.
A mediating digital platform layer will emerge. Which of the following sectors will take the lead has yet to be determined.
Traditional vehicle manufacturers. These will own the hardware platforms and brands, on top of which they can deploy a range of mobility services.
Mapping providers [Here, Mapbox, TomTom]. As they show people a path through their surrounding environment, mapping providers are increasingly in a position to connect a user’s needs to a broad offering of service providers.
Ridesharing [Uber, Lyft, Gett, Ola, Didi]. These software platforms will enable transport experiences. New products and extensions into experiences around the individual trip, from restaurant guides to food and grocery deals, will emerge from cross-industry partnerships.
Technology operating systems [Android Auto, Apple Car Play]. Recognized for fast-paced innovation in consumer electronics, Google and Apple are creating seamless extensions of their smartphones and adjacent services.
Deep tech layers [Otonomo, Xapix]. These technologies enable existing industries to grow. They are based on plug-and-play experiences through continuously evolving technology means (e.g. API-driven data partnerships, blockchain-secured multi-stakeholder transactions).
Enabling the future of automotive - today
Both the technical challenges of autonomous cars and the question of how platforms and mobility systems shape how each of us moves will dominate public discussion.
As companies build mobility services, the way to a customer’s heart will be by creating service experiences, whether around moving, entertaining, learning or relaxing during a trip. Players who build such connected experiences will win the race. And not just on the ground - short distance trips may increasingly take place in the air.
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